In December 2024, Sony and one of the biggest game and Anime publishers in Japan, Kadokawa, signed a strategic capital and business alliance agreement, which allowed Sony to acquire additional Kadokawa shares worth approximately JPY 50bn (~$320m). With this, Sony will become the largest shareholder of Kadokawa, holding about 10% of its shares. This alliance will allow extensive collaboration between the two companies and will significantly bolster Sony’s position in the games and Anime market.

With an annual revenue of $1.8bn in 2023, Kadokawa operates a wide range of business lines across the entertainment industry – including publishing (~50% of total revenue), Anime (~20%) and games (~15%). The company owns some of the biggest Japanese IP franchises, including the Neon Genesis Evangelion comics, The Girl Who Leapt Through Time Anime and the Elden Ring game.

The new alliance means Sony will have easier access to Kadokawa’s extensive portfolio of over 130k IP titles (including books, comics, and Anime) which can be adopted into different entertainment formats, from books to films and TV series (both Anime and live actions), to games and other derivatives. All of these present strong cross-media opportunities, which is important as franchise-based movies and games are prone to be the most popular, particularly in Japan.

The investment will aid in the creation and global distribution of Japanese content

Anime and live-action movies in Japan tend to be adaptations from popular comics or books. The alliance will therefore provide an abundance of IP archive for Sony and its subsidiary studios – including Aniplex (the production company of the Demon Slayers Anime franchise), A-1 Pictures and Clover Works – to develop from. Sony and Kadokawa’s overall production capacity for Anime and games will also be further strengthened in the long-term, with potential co-productions between Sony’s stable of studios and Kadokawa’s six Anime studios (which have been producing some 40 titles per year) and four game development companies.

Crucially, the influence of the alliance goes beyond Japan, however. Kadokawa’s 2000+ movies and Anime titles, including The Girl Who Leapt Through Time, Made in Abyss, and Oshi no Ko, can expect to see further global distribution. Leveraging Sony’s global network, including its Anime-dedicated platform Crunchyroll, Kadokawa’s video titles can now find a wider audience. Furthermore, in terms of games, there is a key focus on globalising Kadokawa’s titles, with many – particularly those from smaller studios such as Acquire and Spike Chunsoft – struggling to gain a substantial audience outside of Japan. Above all, this deal will reinforce Sony’s position as a powerhouse in supplying and distributing Anime, Japanese content and games to the global market.

PlayStation may leverage Kadokawa’s content to drive console uptake

For the games industry, the investment in Kadokawa can bolster Sony’s existing IP portfolio through new collaborative projects, and fuel sustainable growth. With this deeper relationship, Sony could choose to launch some collaborative gaming projects exclusively on the PlayStation platform. This is somewhat unlikely, though, as Kadokawa’s aim of globalising its games IP would be limited if competitors’ console platforms were excluded, with exclusivity in general is becoming increasingly less viable in the face of spiralling game development budgets. However, it would undoubtedly strengthen Sony’s position in the console market to have at least some level of content exclusivity or heavier promotion of key titles on the platform.

Sony is now an Anime giant

This deal will make Sony a giant in Anime production and distribution. Between them, Sony and Kadokawa’s studios are expected to produce or distribute at least 70 to 80 new Anime titles in 2025, about a quarter of the 300 or so TV show Anime produced annually. With a growing demand for Anime worldwide, especially in Europe, content platforms will be increasingly dependent on Sony for a supply of Anime. Sony will have further flexibility to either license out blockbuster Anime titles to the highest bidders, such as Netflix and Amazon Prime Video, or to keep them exclusive to its own Crunchyroll service. Not only will this give Sony more negotiating power in license fees and revenue share, but also establish it as the industry leader through its production, distribution and gamification capability.

The alliance might also spark other long-lasting impacts. Other major Anime producers and distributors in Japan - such as Toei Animation and Toho Animation – may need to strengthen their businesses to compete with Sony. Indeed, in an extremely competitive market, with a myriad of studios and publishers for whom profitability remains challenging, Sony’s deal with Kadokawa makes further consolidation among Anime and IP companies even more likely to emerge in the near future.